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A United Nations report on trade in "blood diamonds" - rough stones whose sale is used to fund conflicts - raises the possibility that an Israeli company active in Liberia and Ramat Gan is dealing in diamonds whose proceeds are used to support rebels in the Ivory Coast.

According to the report, a copy of which was obtained by Haaretz, the company involved is apparently Perry Diamonds of Ghana, which is linked to the late Israeli diamond merchant Israel Freund, a former member of the Ramat Gan diamond exchange who died four months ago. Perry is considered a small company.

The report says the UN panel visited Liberia to examine the possibility that rough diamond suppliers from Ivory Coast, including those who provided rough stones to Perry, had moved their operations there. Liberia serves as a transit point for diamond merchants in adjacent countries, and that is where they receive official certification that their sources are not African rebel groups, but legal mines - a process known as the Kimberly Process.

The panel found that one diamond supplier, identified as "A." in the report, established a company in the Liberian capital of Monrovia in partnership with Yuri Freund. During a visit to Monrovia this past June, the panel examined suspicious aspects of the company's activities - namely, the fact that the diamonds the company advertised for sale were similar in make-up to Ivory Coast diamonds, but the document attesting to their origin said they came from a western Liberian mine, far from the Ivory Coast border.

Moreover, the date on the document was also the date on which the diamonds arrived in Monrovia, though under Liberian law, the date must be the one on which the diamonds left the mine. The panel did not think one day was enough time for the diamonds to make their way from the mine to the capital and concluded that the documents were probably false.

The UN report also noted that the company's two partners are known to have been connected to the illegal diamond trade in the past. Partner A. was one of Frey's main suppliers of Ivory Coast diamonds, and his family remains active in the diamond business in that country. And Freund was investigated in Mali in 2004 on suspicion of smuggling rough diamonds through the airport in Bamako.

The panel concluded that the partners, A. and Freund, apparently established a company to create an additional illegal channel for rough diamonds from Ivory Coast. It therefore submitted its findings to Israel's diamond controller, Shmuel Mordechai, who heads the Diamonds, Precious Stones and Jewelry Administration in the Ministry of Industry, Trade and Labor. Mordechai responded that the relevant Israeli authorities have not identified any suspicious imports by the Freund family's operations.

The UN report on the situation in Ivory Coast, where civil war continues to rage, said that Israel, like the United Arab Emirates, Guinea and Mali, had not provided the panel with satisfactory answers to its questions. Israel, it noted, is of utmost importance to this issue, because the country is a key player in the global trade in rough stones.

Blood diamonds are stones whose trade supports rebels in civil wars against legal governments, wars whose victims are hapless civilians. Israel is a senior member of the Kimberly Process, meant to eliminate the trade in blood diamonds, which flourished in Africa in the 1990s. Since the Kimberly Process was instituted, each diamond now receives a document attesting to its legitimate origin. Nonetheless, the process has not completely eliminated trade in blood diamonds, which account for about four percent of world diamond sales.

Mordechai, the Industry Ministry's diamond controller, said "we completely reject the reports about Israeli trade in blood diamonds. The State of Israel has never dealt in rough diamonds from Ivory Coast. In recent years, we have cooperated fully with the UN panel and proved beyond doubt that diamonds without Kimberly certification do not enter Israel ... Israel has been part of the Kimberly Process from the beginning and operates a strict system of supervision and enforcement."

The Freund family said that "all the family's activities in Liberia are legal; everything is registered and documented as required. The family is not connected in any way to the blood diamond trade. Shimon Freund was interrogated in 2008 by the relevant UN unit, whose allegations were never substantiated. Yuri Freund established the company in Liberia without partners. Yuri has absolutely no connection to the matter and has never been investigated. The suspicions that have been made public are nothing but nonsense and lies."